Wal-Mart: Low Prices, at what Price? Akshay Kochar Digital Innovation and Cultural Transformation Professor Jones, Professor Benick February 5th 2009 The year was 1962, when a forty-four year old man from Oklahoma inspired to create what has now become not only the world’s largest retailer, but the world’s largest company (Fishman, 1). Sam Walton began his career three days after graduating from University of Missouri as a Management Trainee at JC Penny, where he was able to gain his first experience in retail. Following this, Sam Walton got the true taste of entrepreneurship when he purchased a “Ben Franklin” variety store located in Newport Arkansas. This allowed him to utilize his first retail strategies and led to become a very successful business venture, so much so, that the landlord refused to renew the lease to Walton, wanting to pass the store on to his own son. Soon enough, Samuel Moore Walton would go on to start a line of Walton’s Five and Dime stores, and in 1962, the first Wal-Mart was opened. “Today, over 7,800 Wal-Mart stores and Sam’s Club locations in 16 markets worldwide employ more than 2 million associates, and serve more than 100 million customers per year” (Wal-Mart About Us). These are just a few statistics that show the power of Wal-Mart in today’s world. It has grown tremendously and continues to each day. The strategies that were implemented in Sam Walton’s Ben Franklin variety store continue to be utilized half a century after he had come up with them and on a much larger scale. Making sure the shelves were fully stocked at all times with a variety of products at the lowest possible price, longer store operational hours than competitors, buying wholesale from suppliers at a reduced cost and passing those savings onto the customer, and location x 3. It is that last strategy, location, location, location which has caused uproar amongst Wal-Mart critics. The world’s largest company has opened stores all across America and the effect it has had on small towns is visible in more than just a few locations. The retail powerhouse has also been at the center of much debate surrounding the issues of importing foreign goods, which has caused the loss of jobs here in North America and poor working conditions from its largest importer, China. In the 2005 documentary by Robert Greenwald titled “Wal-Mart: The High Cost of Low Price”, it was shown how Wal-Mart has used a “reverse auction” strategy when dealing with its’ suppliers. After choosing a product that Wal-Mart wants to sell, it contacts the different suppliers and asks them how much it will cost to produce it. After going back and forth with numerous suppliers, Wal-Mart agrees to terms with the cheapest supplier and begins producing. In this video, the interviews with the Chinese suppliers were quite alarming. They explained how these reverse auctions were quite intense and how Wal-Mart would sometimes argue over a single penny when it came to the cost of producing. Wal-Mart has however defended themselves by explaining that by utilizing such strategies it benefits the customers themselves because in the end they are the ones that save due to the low prices. But the other concern about this is the loss of jobs created by outsourcing the manufacturing service. It has lead North America to go from a manufacturing region, to a consumer environment. “Of course, U.S. companies have been moving jobs offshore for decades; long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.” (Fishman, 1) The damage done by Wal-Mart’s strategies are not only visible on the international scale such as presented above, but also on a local one. Small towns and cities have went from firm economies and striving mom and pop stores, to nearly ghost towns in which business have had to close down due to the immense competition presented by a newly constructed Wal-Mart (Anderson, 1). One example of this would be the state of Iowa, in which the first Wal-Mart opened in 1983 (Freeman, 1). Since then, small businesses in communities of Iowa with less than five thousand people have been forced to close down. In 1982, Wal-Mart opened a store on the outskirts of a town in Oklahoma called Nowata. This small town consisted of 4,000 people and surely enough half of the small businesses in downtown Nowata were forced to close down. Then, 12 years after the Wal-Mart had arrived in the Oklahoma town, it decided to close its’ doors and open another location 30 miles away in Bartlesville. This left Nowata absolutely stranded and the damage of Wal-Mart on another town was complete. (Executive Intelligence Review) In Mississippi, five years after a Wal-Mart entered, small towns in the state witnessed a 17% drop in the dollar volume of grocery store trade. It’s statistics like these that show the common concerns raised amongst the inhabitants of towns and cities across America. Many have warned about the presence and damage a Wal-Mart would do to the economy of the town, but their voices have sometimes gone unheard until it’s too late. Here in Canada, there have been situations in which communities have banned together and resisted against the opening of a Wal-Mart. In 2002, four thousand people in Vancouver BC signed a petition which was to be presented to city council during a meeting. This petition was against the construction of a Wal-Mart at the intersection of Marine Drive and Main Street. Many individuals, especially shop owners, were concerned about the impact it would have on their local businesses. "In this tough time, everyone is looking for a price break”, said Paul Om owner of Paul's True Value Hardware on Main Street. He realizes, as do many other store owners that the tough economic times are a strain on even the loyalist of customers. Wal-Mart’s side of this argument is that it claims to open up jobs in small towns and drive up the economy due to increased sales. However, though this may be true for major cities, small towns are made of many corner stores and small shops which need to survive in order to support the community members. As for the creation of jobs, the cases brought forth against Wal-Mart and their labour relations are part of another heated debate. The treatment of minorities and women by Wal-Mart locations across America has been questioned for years now and many employees have pressed charges on their previous employer. “They don’t care what you sacrifice, it doesn’t matter to them about your families...all that matters is what the bottom line profit is for that store that month”. This quote was said by Stan Fortune, a District Loss Prevention Manager for Wal-Mart for seventeen years, in the movie “Wal-Mart – The high cost of Low Prices”. It goes to show that not only cashiers and sales reps felt that Wal-Mart was unfair, but also that managers in sections within the company saw that what the company was doing was unfair and unjust. Many parties have argued on both sides of the debate and common opinions have come up. Small business owners have made it aware that they fear the losses that they would suffer if competition from a Wal-Mart was present. Many have explained how in the past, the presence of other big box stores have significantly decreased their sales and Wal-Mart may prove to be more than they can handle. Critics during these tough economic times have blamed Wal-Mart for importing goods and therefore reducing the manufacturing jobs here in America. On the other hand, Wal-Mart has argued that its’ presence has only solidified the economy of its’ towns and created many jobs for people who would otherwise be unemployed. The stakeholders are the ones who feel the most passionately about this and that includes not only the over two million employees, but also the actual stockholders who are only worried about one thing, money. But small business owners are also worried about money, and they too feel strongly about the effects of Wal-Mart on America. As presented earlier in the case of Vancouver, community citizens who have no connection to Wal-Mart are also ready to be at the forefront of this debate. Since there seems to be no solution as to what Wal-Mart could do (perhaps creating manufacturing plants for their products here in the US), this seems to be an endless social concern. However, hopefully a resolution is created sooner, than later. Word Count: 1,455 Works Cited Anderson, William. "Does Wal-Mart Destroy Communities? - William L. Anderson - Mises Institute." Ludwig von Mises Institute - Homepage. 1 May 2004. 05 Feb. 2009 <http://mises.org/article.aspx?Id=1521>.
Fishman, Charles. "Wal-Mart You Don't Know | Fast Company." FastCompany.com - Where ideas and people meet | Fast Company. 3 Oct. 2008. 03 Feb. 2009 <http://www.fastcompany.com/magazine/77/walmart.html>.
Freeman, Richard. "Wal-Mart Collapses U.S. Cities and Towns." Executive Intelligence Review - LaRouche Publications. 21 Nov. 2003. Executive Intelligence Review. 02 Feb. 2009 <http://www.larouchepub.com/other/2003/3045walmart_iowa.html>.
Inman, Randy. "Is Wal-Mart Destroying Small Town America? - Associated Content." Associated Content - associatedcontent.com. 04 Dec. 2006. 02 Feb. 2009 <http://www.associatedcontent.com/article/92271/is_walmart_destroying_small_town_america.html?cat=9>.
"Sam Walton -." Wikipedia, the free encyclopedia. 03 Feb. 2009 <http://en.wikipedia.org/wiki/Sam_Walton>.
"STORE WARS: Wal-Mart Facts." PBS. 02 Feb. 2009 <http://www.pbs.org/itvs/storewars/stores2.html>.
"Wal-Mart meets stiff resistance." The Republic of East Vancouver - Your completely biased news source since 2000. 05 Feb. 2009 <http://www.republic-news.org/archive/37-repub/repub_37_walmart.html>.
"Wal-Mart Stores, Inc. -- Company History." Connecting Angel Investors and Entrepreneurs. 02 Feb. 2009 <http://www.fundinguniverse.com/company-histories/WalMart-Stores-Inc-Company-History.html>.
"Wal-Mart Stores, Inc. - History Timeline." Wal-Mart Stores, Inc. 02 Feb. 2009 <http://walmartstores.com/AboutUs/7603.aspx>.
"Wal-Mart Stores, Inc. - History." Wal-Mart Stores, Inc. 02 Feb. 2009 <http://walmartstores.com/AboutUs/297.aspx>.
"Wal-Mart: The High Cost of Low Price -." Wikipedia, the free encyclopedia. 02 Feb. 2009 <http://en.wikipedia.org/wiki/Wal-Mart:_The_High_Cost_of_Low_Price>.
WAL-MART: The High Cost of Low Price. Dir. Robert Greenwald. 2005.
"Who Killed the Golden Swan?" More Wal-Mart Means Less Canada | Culture slips away; Canada's small towns crushed by
America's iconic behemoth. 05 Feb. 2009 <http://www.thefutureofstratford.ca/>.
"YouTube - WAL-MART: The High Cost of Low Price -- teaser trailer." YouTube - Broadcast Yourself. 05 Feb. 2009 <http://www.youtube.com/watch?v=hiSmlmXp-aU>.
Wal-Mart: Low Prices, at what Price?
Akshay Kochar
Digital Innovation and Cultural Transformation
Professor Jones, Professor Benick
February 5th 2009
The year was 1962, when a forty-four year old man from Oklahoma inspired to create what has now become not only the world’s largest retailer, but the world’s largest company (Fishman, 1). Sam Walton began his career three days after graduating from University of Missouri as a Management Trainee at JC Penny, where he was able to gain his first experience in retail. Following this, Sam Walton got the true taste of entrepreneurship when he purchased a “Ben Franklin” variety store located in Newport Arkansas. This allowed him to utilize his first retail strategies and led to become a very successful business venture, so much so, that the landlord refused to renew the lease to Walton, wanting to pass the store on to his own son. Soon enough, Samuel Moore Walton would go on to start a line of Walton’s Five and Dime stores, and in 1962, the first Wal-Mart was opened.
“Today, over 7,800 Wal-Mart stores and Sam’s Club locations in 16 markets worldwide employ more than 2 million associates, and serve more than 100 million customers per year” (Wal-Mart About Us). These are just a few statistics that show the power of Wal-Mart in today’s world. It has grown tremendously and continues to each day.
The strategies that were implemented in Sam Walton’s Ben Franklin variety store continue to be utilized half a century after he had come up with them and on a much larger scale. Making sure the shelves were fully stocked at all times with a variety of products at the lowest possible price, longer store operational hours than competitors, buying wholesale from suppliers at a reduced cost and passing those savings onto the customer, and location x 3.
It is that last strategy, location, location, location which has caused uproar amongst Wal-Mart critics. The world’s largest company has opened stores all across America and the effect it has had on small towns is visible in more than just a few locations. The retail powerhouse has also been at the center of much debate surrounding the issues of importing foreign goods, which has caused the loss of jobs here in North America and poor working conditions from its largest importer, China. In the 2005 documentary by Robert Greenwald titled “Wal-Mart: The High Cost of Low Price”, it was shown how Wal-Mart has used a “reverse auction” strategy when dealing with its’ suppliers. After choosing a product that Wal-Mart wants to sell, it contacts the different suppliers and asks them how much it will cost to produce it. After going back and forth with numerous suppliers, Wal-Mart agrees to terms with the cheapest supplier and begins producing. In this video, the interviews with the Chinese suppliers were quite alarming. They explained how these reverse auctions were quite intense and how Wal-Mart would sometimes argue over a single penny when it came to the cost of producing. Wal-Mart has however defended themselves by explaining that by utilizing such strategies it benefits the customers themselves because in the end they are the ones that save due to the low prices. But the other concern about this is the loss of jobs created by outsourcing the manufacturing service. It has lead North America to go from a manufacturing region, to a consumer environment.
“Of course, U.S. companies have been moving jobs offshore for decades; long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.” (Fishman, 1)
The damage done by Wal-Mart’s strategies are not only visible on the international scale such as presented above, but also on a local one. Small towns and cities have went from firm economies and striving mom and pop stores, to nearly ghost towns in which business have had to close down due to the immense competition presented by a newly constructed Wal-Mart (Anderson, 1). One example of this would be the state of Iowa, in which the first Wal-Mart opened in 1983 (Freeman, 1). Since then, small businesses in communities of Iowa with less than five thousand people have been forced to close down.
In 1982, Wal-Mart opened a store on the outskirts of a town in Oklahoma called Nowata. This small town consisted of 4,000 people and surely enough half of the small businesses in downtown Nowata were forced to close down. Then, 12 years after the Wal-Mart had arrived in the Oklahoma town, it decided to close its’ doors and open another location 30 miles away in Bartlesville. This left Nowata absolutely stranded and the damage of Wal-Mart on another town was complete. (Executive Intelligence Review)
In Mississippi, five years after a Wal-Mart entered, small towns in the state witnessed a 17% drop in the dollar volume of grocery store trade. It’s statistics like these that show the common concerns raised amongst the inhabitants of towns and cities across America. Many have warned about the presence and damage a Wal-Mart would do to the economy of the town, but their voices have sometimes gone unheard until it’s too late.
Here in Canada, there have been situations in which communities have banned together and resisted against the opening of a Wal-Mart. In 2002, four thousand people in Vancouver BC signed a petition which was to be presented to city council during a meeting. This petition was against the construction of a Wal-Mart at the intersection of Marine Drive and Main Street. Many individuals, especially shop owners, were concerned about the impact it would have on their local businesses. "In this tough time, everyone is looking for a price break”, said Paul Om owner of Paul's True Value Hardware on Main Street. He realizes, as do many other store owners that the tough economic times are a strain on even the loyalist of customers.
Wal-Mart’s side of this argument is that it claims to open up jobs in small towns and drive up the economy due to increased sales. However, though this may be true for major cities, small towns are made of many corner stores and small shops which need to survive in order to support the community members. As for the creation of jobs, the cases brought forth against Wal-Mart and their labour relations are part of another heated debate. The treatment of minorities and women by Wal-Mart locations across America has been questioned for years now and many employees have pressed charges on their previous employer. “They don’t care what you sacrifice, it doesn’t matter to them about your families...all that matters is what the bottom line profit is for that store that month”. This quote was said by Stan Fortune, a District Loss Prevention Manager for Wal-Mart for seventeen years, in the movie “Wal-Mart – The high cost of Low Prices”. It goes to show that not only cashiers and sales reps felt that Wal-Mart was unfair, but also that managers in sections within the company saw that what the company was doing was unfair and unjust.
Many parties have argued on both sides of the debate and common opinions have come up. Small business owners have made it aware that they fear the losses that they would suffer if competition from a Wal-Mart was present. Many have explained how in the past, the presence of other big box stores have significantly decreased their sales and Wal-Mart may prove to be more than they can handle. Critics during these tough economic times have blamed Wal-Mart for importing goods and therefore reducing the manufacturing jobs here in America. On the other hand, Wal-Mart has argued that its’ presence has only solidified the economy of its’ towns and created many jobs for people who would otherwise be unemployed. The stakeholders are the ones who feel the most passionately about this and that includes not only the over two million employees, but also the actual stockholders who are only worried about one thing, money. But small business owners are also worried about money, and they too feel strongly about the effects of Wal-Mart on America. As presented earlier in the case of Vancouver, community citizens who have no connection to Wal-Mart are also ready to be at the forefront of this debate. Since there seems to be no solution as to what Wal-Mart could do (perhaps creating manufacturing plants for their products here in the US), this seems to be an endless social concern. However, hopefully a resolution is created sooner, than later.
Word Count: 1,455
Works Cited
Anderson, William. "Does Wal-Mart Destroy Communities? - William L. Anderson - Mises Institute." Ludwig von Mises Institute - Homepage. 1 May 2004. 05 Feb. 2009 <http://mises.org/article.aspx?Id=1521>.
Fishman, Charles. "Wal-Mart You Don't Know | Fast Company." FastCompany.com - Where ideas and people meet | Fast Company. 3 Oct. 2008. 03 Feb. 2009 <http://www.fastcompany.com/magazine/77/walmart.html>.
Freeman, Richard. "Wal-Mart Collapses U.S. Cities and Towns." Executive Intelligence Review - LaRouche Publications. 21 Nov. 2003. Executive Intelligence Review. 02 Feb. 2009 <http://www.larouchepub.com/other/2003/3045walmart_iowa.html>.
Inman, Randy. "Is Wal-Mart Destroying Small Town America? - Associated Content." Associated Content - associatedcontent.com. 04 Dec. 2006. 02 Feb. 2009 <http://www.associatedcontent.com/article/92271/is_walmart_destroying_small_town_america.html?cat=9>.
"Sam Walton -." Wikipedia, the free encyclopedia. 03 Feb. 2009 <http://en.wikipedia.org/wiki/Sam_Walton>.
"STORE WARS: Wal-Mart Facts." PBS. 02 Feb. 2009 <http://www.pbs.org/itvs/storewars/stores2.html>.
"Wal-Mart meets stiff resistance." The Republic of East Vancouver - Your completely biased news source since 2000. 05 Feb. 2009 <http://www.republic-news.org/archive/37-repub/repub_37_walmart.html>.
"Wal-Mart Stores, Inc. -- Company History." Connecting Angel Investors and Entrepreneurs. 02 Feb. 2009 <http://www.fundinguniverse.com/company-histories/WalMart-Stores-Inc-Company-History.html>.
"Wal-Mart Stores, Inc. - History Timeline." Wal-Mart Stores, Inc. 02 Feb. 2009 <http://walmartstores.com/AboutUs/7603.aspx>.
"Wal-Mart Stores, Inc. - History." Wal-Mart Stores, Inc. 02 Feb. 2009 <http://walmartstores.com/AboutUs/297.aspx>.
"Wal-Mart: The High Cost of Low Price -." Wikipedia, the free encyclopedia. 02 Feb. 2009 <http://en.wikipedia.org/wiki/Wal-Mart:_The_High_Cost_of_Low_Price>.
WAL-MART: The High Cost of Low Price. Dir. Robert Greenwald. 2005.
"Who Killed the Golden Swan?" More Wal-Mart Means Less Canada | Culture slips away; Canada's small towns crushed by
America's iconic behemoth. 05 Feb. 2009 <http://www.thefutureofstratford.ca/>.
"YouTube - WAL-MART: The High Cost of Low Price -- teaser trailer." YouTube - Broadcast Yourself. 05 Feb. 2009 <http://www.youtube.com/watch?v=hiSmlmXp-aU>.